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The Link between Human Capital, Mass Layoffs, and Firm Deaths

The Link between Human Capital, Mass Layoffs, and Firm Deaths

John M. Abowd

Kevin L. McKinney

Lars Vilhuber

Publisher:

University of Chicago Press

DOI:10.7208/chicago/9780226172576.003.0013

This chapter uses the Longitudinal Employer-Household Dynamics (LEHD) data set to assess the human capital embodied in a firm's workforce and relate it to the performance of the firm. It observes that mass layoffs and firm failure are much more likely in firms with a large proportion of low human capital workers. Firms that do not fail generally upgrade the human capital of their workforce. Moreover, firms with a single displacement event are more likely to die. A single displacement event is linked with a significant reduction in the upskilling of the continuing firm's workforce. Furthermore, the analysis indicates that firms that disproportionately employ workers in the highest quartile of the skill distribution are less likely to close, even given a displacement event, than are other firms that experience displacement events.

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 07 June 2020